Postal Service: House must act to stem mail losses

With financial losses mounting, the nearly bankrupt U.S. Postal Service is urging the House to quickly pass legislation that would give it broad authority to close thousands of low-revenue post offices, reduce labor costs and end Saturday delivery.

At a meeting Friday, the Postal Service's board of governors said that a bill passed by the Senate last week doesn't go far enough to give the agency the latitude it needs. That bill would provide the Postal Service with an $11 billion cash infusion to help pay down ballooning debt but halt the immediate closing of up to 252 mail-processing centers and 3,700 post offices.

The Postal Service called the closings a critical part of its cost-cutting plan to save some $6.5 billion a year and regain profitability by 2015. Anxious for legislative action but uncertain when the House may act, the mail agency said it would proceed with planned closings after May 15, but in a "methodical and measured" way that considers the special needs of rural communities.

"The bottom line is that the Senate bill does not provide the Postal Service with the flexibility and speed that it needs to have a sustainable business model," said Thurgood Marshall Jr., chairman of the postal board of governors. "Our financial condition has been deteriorating for several years, and we have been operating with a very low cash balance."

"We therefore strongly encourage the enactment of legislation that enables the Postal Service to avoid a default and return to long-term profitability," he said.

At stake are more than 100,000 jobs, and the deteriorating situation has caused consternation in many communities across the country, particularly in rural areas which rely more heavily on postal service for the delivery of prescription drugs, newspapers and other services. The mail agency forecast a record $14.1 billion loss by the end of this year; without changes, it said, annual losses will exceed $21 billion by 2016.

The Senate bill would slow if not stop thousands of the closings. With prospects for immediate House action uncertain, nearly half the senators in letters this week called on Postmaster General Patrick Donahoe to wait on closing any mail facility until Congress passes final legislation. The Senate measure would block about half the closings of mail processing centers planned by the Postal Service, from 252 to 125; protect rural post offices for at least a year; give affected communities new avenues to appeal closing decisions; and forbid cuts to Saturday delivery for at least two years.

The House version, which passed on a party-line GOP vote in committee last fall, calls for far more aggressive cost-cutting. House Democrats remain largely opposed to the bill because of the potential for wide-ranging job layoffs, while rural lawmakers worry about the election-year impact on their communities.

On Friday, the Postal Service stressed that the Senate plan fell far short in stemming losses.

For instance, the Senate bill would give an $11 billion cash infusion and defer payment requirements that would help the Postal Service post an initial profit of $8.1 billion this year. In the following years, however, the mail agency would return to annual losses of between $2 billion to $4 billion as it grapples with continuing labor costs and health payments, even after assuming the mail agency can eliminate Saturday mail delivery beginning in 2015, according to an initial postal analysis reviewed by The Associated Press. The Senate bill allows for an end to Saturday delivery in two years, and then only as a last resort to cut costs.

The House version, co-sponsored by Rep. Darrell Issa, R-Calif., also provides for an $11 billion infusion but allows the Postal Service to proceed with its full proposed cuts, including ending Saturday delivery after six months. If the agency fails to achieve significant cost-savings within two years, a national commission and independent control board would then step in to implement more drastic postal cuts, overriding union contracts and ordering layoffs if necessary.

The Postal Service is opposed to an independent control board that would supplant its postal board of governors; postal unions are also strongly opposed. The mail agency is hoping for a House-Senate compromise that strips out the control board while authorizing cuts to Saturday delivery.

Some rural House lawmakers remain hesitant.

In a letter last week to House leaders, Rep. Adrian Smith, R-Neb., who co-chairs the Congressional Rural Caucus, and 11 other lawmakers emphasized that they want additional changes to the bill. Closing rural post offices would achieve only a small amount of savings while putting a "tremendous strain" on communities in more isolated areas which depend on the service, they wrote.

Smith backs an amendment that would cap the closing of rural post offices at no more than 5 percent in a given year; the current House bill limits it to no more than 10 percent. Even with such an amendment, Smith is taking a wait-and-see approach on the bill to make sure there are sufficient rural protections, said spokesman Michael Short.

Issa and the bill's co-sponsor, Rep. Dennis Ross, R-Fla., say they would support a 5 percent cap on rural closings, which would mean that no more than 500 small rural post offices could be closed in a year.

If the House fails to act soon, postal officials say, they will face a cash crunch in August and September, when the agency must pay more than $11 billion to the U.S. Treasury to prefund future retiree health benefits. Already $13 billion in debt, the health payment obligation will force the mail agency to run up against its $15 billion debt ceiling, causing it to default on the payments.

The agency's second-quarter financial results will be released next week.

"If we can gain the flexibility to move quickly ... we can return to profitability," Donahoe said. If not, "we risk becoming a permanent burden to the American taxpayer. "

The Postal Service, an independent agency of government, does not receive taxpayer money for its operations but borrows money from the Treasury to meet payment obligations. It is subject to congressional control of major aspects of its operations.